Current analyst new-play favorites include the horizontal Permian, Utica, Mississippi Lime, Woodbine, Pearsall, Uinta, Tuscaloosa Marine Shale. What's the next great new Lower 48 horizontal play? There will be fewer going forward, according to analysts at Tudor, Pickering, Holt & Co. Securities Inc. "Interestingly, U.S. resource plays continue to be either smaller in areal extent or increase in complexity-there aren't many Bakken, Eagle Ford, Marcellus (plays) popping up," they note. Those three formations have been vast in acreage they underlie, commercial-success repeatability across that acreage and predictability in hydrocarbons they give up-all hallmarks of a "resource play." Investors wanting to anticipate the next great resource play may run out of relatively easy opportunities, so importance in stock-picking should be place more in the future on playmakers' wherewithal to tackle complicated rocks. "We expect this trend (of fewer new plays) to continue and, over time, the affinity for stocks with differentiated abilities to find, develop and repeat smaller-field-type plays will increase." Gabriele Sorbara, E&P analyst for Imperial Capital LLC, says the Utica play, which Chesapeake Energy Corp. proved last year, remains promising. Yet, "the leveraged Ohio Utica shale companies-PDC Energy Inc. and Rex Energy Corp. in our (coverage) universe-may underperform the group in the near term, despite the numerous catalysts to come, given the high expectations set on the play." As more data develops, "we believe a buying opportunity may emerge in 2013." The TPH analysts' favorite new horizontal play is the horizontal Permian Basin "where we are expecting a slew of updates, including (M&A) transactions, well results and inventory updates over the next three to six months." Sorbara also likes the Permian's more immediate potential: "...In this volatile market, we continue to believe the operators in the (more) proven plays, specifically...in the Permian Basin, Eagle Ford and Williston Basin, present the more attractive risk/reward profiles." The TPH analysts also have the Utica on an "areas to watch" list. Others are the --Tuscaloosa Marine Shale, which Encana Corp., Devon Energy Corp. and Goodrich Petroleum Corp. are working to commercialize; --the Woodbine play in East Texas that is being drilled by several private companies as well as Crimson Exploration Inc., Halcon Resources Corp., Zaza Energy Corp. and Devon; --the Pearsall in South Texas that is being worked by Cabot Oil & Gas Corp., EOG Resources Inc., Goodrich and others; --the Uinta in the Rockies that Newfield Exploration Co., Bill Barrett Corp. and Berry Petroleum Co. are drilling; and --the Mississippi Lime that was commercialized by SandRidge Energy Inc. last year and is also being proven by Chesapeake, Midstates Petroleum Co. Inc., Range Resources Corp., Devon, Royal Dutch Shell and Apache Corp. Midstates is expanding in the Mississippi Lime, buying a portfolio from privately held Eagle Energy of Oklahoma LLC for $325 million in cash and some $325 million of preferred shares. The TPH analysts expect the deal, which is to close by the end of this month, will bring a less complex cash-flow-maker to Midstates' portfolio to balance its geologically complex Louisiana properties. "The Mississippi Lime is one of the more recent emerging oily/NGLs-rich plays onshore with the distinct characteristics of being shallow reservoirs-driving low well costs and high-water-cut production," the TPH analysts report. Meanwhile, for more Utica-stock-pop exposure sooner, Sorbara suggests, from among just five Utica names in the Imperial Capital coverage list current, Magnum Hunter Resources Corp., "with a potential liquidity event on the horizon, given the company has hired an advisor to market its Utica shale properties in search of a joint-venture partner." Not covered by Imperial but also marketing Utica packages include Chesapeake and EV Energy Partners LP. -Nissa Darbonne, Editor-at-Large, Oil and Gas Investor, OilandGasInvestor.com, Oil and Gas Investor This Week, A&D Watch, A-Dcenter.com, UGcenter.com. Contact Nissa at email@example.com.
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